3 Commodity Stocks To Sell On The Pop: KMI, TCK, BHP

Bullish forces have returned to Wall Street as market participants appear to be changing their tune regarding the looming Fed taper; investors seem to be embracing the potential reduction in bond-repurchases judging by the market’s upbeat reaction to better-than-expected economic data, which up until recently served as an excuse to lock-in profits before the taper. Nonetheless, volatile trading is likely to dominate markets over the coming days as uncertainty in Syria could spark worries that shift focus away from the Fed meeting slated for September 17-18 [for more commodity futures news and analysis subscribe to our free newsletter].

Given the recent rally and impressive gains across Wall Street YTD, many are hesitant to jump in long, especially ahead of the possible taper announcement. As such, below we highlight three commodity stocks that may offer an attractive short selling opportunity for those looking to bet against some of the stellar run-ups already seen across Wall Street.

The stocks included here are deemed to be great trading candidates for three reasons. First and foremost, each of these companies boasts a market cap upwards of $10 billion along with average daily trading volumes topping the $1 million mark, in an effort to weed out smaller, more volatile, trading prospects.

Second, these securities are trading below their 200-day moving averages, thereby implying that they are in longer-term downtrends. Lastly, these stocks are also trading above their five-day moving averages, which makes them attractive for swing traders looking to sell short before they resume their downtrend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques [see How To Lose Money Investing In Commodities]:

KMI recently traded below its 200-day moving average (yellow line) after failing to summit the $41 level in late May and later again in mid-July of this year. Although this stock has previously rebounded off the $36 level, as seen in late-June, what’s concerning is the above-average selling volume seen on 9/4; KMI will likely continue to post lower-lows (red line) over the coming weeks until it establishes support above $37 a share.

This stock has staged an encouraging rebound over the past two months since falling below its 200-day SMA in February of this year. Despite the attractive potential for upside, we advise investors to wait and see for TCK to establish definitive support above $30 a share before jumping in long; notice how this stock previously failed to summit the same resistance level (red line) in early April and later again in May of this year.

This chart setup is similar to the one above; notice how BHP is approaching a key resistance level (red line) which it has failed to summit on several occasions from April through May of this year. We would advise holding off from jumping in long here until BHP establishes definitive support above its 200-day SMA.

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